Updated on May 06, 2025 02:36:55 PM
Foreign Direct Investment (FDI) in the automobile sector is the second largest automotive production sector, with a share of GDP of 7.1% in the country after the computer software and hardware sector, accounting for 15.8% FDI inflow in 2021-2022.
The automobile sector has been foreseen as one of the flourishing among the rest of the sectors in the Indian economy since it has much potential to generate rich revenues that are also associated with three interwoven dimensions –technological leap, organized workforce, and cost-effectiveness.
What Data Says?
The development in this sector directly affects other major sectors like metal, paint, technical gadgets, tube and tire, auto components, etc. also plays an essential and integrated role in attempting acceleration in the growth and leverage export of the automotive production. Meanwhile, this sector saw a sharp leap in specialized innovation and sustainability known as the Electronic Vehicle (EV) ecosystem.
The victory associated with this sector has stepped up a significant milestone with the sale of 8,32,434 vehicles in FY 23-24. It is now expected to reach and secure over ₹ 50,000 (US$ 709 Bn) in India by 2025.
This outshining zenith of electric vehicles, with a recorded CAGR of 49%, is not only limiting to achieving green solutions to combat carbon emission but also opens up variables of horizons towards employment opportunities by 2030
In addition, the government lays their investment scheme up to ₹ 25,938 crore to become a prominent automotive exporter in the next three years. Meanwhile, it only contributes over 4.7% share to the exporter of the Indian automobile sector. Furthermore, in the wake of safeguarding natural resources like fossil fuels and their adverse impact of carbon emissions on the aesthetic values of the environment, the sustainable drive towards electric vehicles over fuel-oriented vehicles is far more preferred in order to maintain the targeted goal of sustained future generation.
The automobile industry has gripped its potential to hold the realm of passionate investors with the accounting flow of US$34.74 Bn between April 2000 to March 2023 in FDI equity flow, recorded for a 5.45% improvement during the course of the period.
For the Participation!
To participate in FDI in the automobile sector, applicants are required to register under the Foreign Investment Facilitation Portal (FIFP). The procedure can be puzzling for any newcomer applicant since it incorporates several terms and conditions without direct access to portals that can generate approvals for FDI.
Table of Content
To shape rapid mobility of infrastructure, smooth trade supply, better operational efficiency, 24*7 dedicated services and significant market share in the automobile sector serves better marketing strategies in raising a dynamic share in the foreign market.
The components permit under automobile sector in FDI are as follows
Many documents are required for FDI in poultry and dairying sectors which are as follows:
Following are the procedures which required at the time of FDI in the automobile sector:
Applicants must fill out the online application form along with the relevant documents for making out the proposal for Foreign Direct Investment.
Filing the proposal for FDI online within two working days, DIPP then will address the concerned administrative ministry to transfer the proposal of applicants electronically.
Collect all the requisite documents for continuing the process of the investment proposal. In case documents may be found incorrect, applicants will be held responsible in case of any deviation found.
The DIPP along with potential authorities will process the application internally and recognize various ministries for adding several comments such as the Ministry of Home Affairs, Reserve Bank of India, Ministry of External Affairs, Ministry Of Finances.
Following are the key advantages that put forward the foreign and local investors towards the Indian Market:
The benefits of automobile sectors in FDI are as follows:
Conclusion
India is approached as the world's second-largest prosperous automobile sector that can attract global investors along with an estimated FDI equity inflow of ₹15 lakh crore. It has always strived for precise alternatives to replace the tailpipe emissions from EVs (Electric vehicles) associated with the expectation of efficient, cheap, and biodegradable merits by foreign and local investors in the line of integrated globalization input widely.
Several other factors to consider for investors while investing in heavy industries sector are listed below:
At Professional Utilities, we leverage our industry knowledge and expertise to help businesses navigate complex regulations, minimize risks, and optimize operations for maximum efficiency and profitability.
Yes, FDI is allowed in automobile industry by the gross inflow of FDI equity up to 2 to 3 billion dollars between FY 15 to 21.
Being a fastest growing network among the 10th largest automobile producers in the world, it currently ranks at the 2nd position of automobile sector in India with the size of USD$ 100 Bn in FY 21. It is now estimated to cross over ₹ 15 lakh crore by the end of the year 2024.
To support the ecosystem of manufacturing market of hybrid and Electric Vehicles (EV) FAME scheme generally highlights creation of technology, boost demand, infrastructure and pilot projects.
For the mobility of sustainable alternatives on the Indian highways, it has been extended in the country from 2019-20 to 2021-2022. This scheme has further extended up to March 31, 2024.
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